China’s Trouble with the Neighbors

BEIJING – China’s “good neighbor” policy is under unprecedented pressure; indeed, it is at its nadir since the Cold War’s end. One after another, frictions with neighboring countries have arisen recently.

From the territorial disputes with Vietnam and the Philippines in the South China Sea to tensions with Burma (Myanmar) and Thailand, relationships that were sound, if not always friendly, have now soured. Myanmar’s decision to shelve the Chinese-backed Myitsone Dam project shocked China. Likewise, the killing of 13 Chinese boat crewmen on the Mekong River in October serves as a stark reminder that China’s presumably peaceful southern land border, which has been untroubled for nearly 20 years, today resembles the most hostile sort of neighborhood.

China’s people and government are especially dismayed by the Mekong killings, which seemed to demonstrate, once again, the government’s inability to protect its citizens from being murdered abroad, despite the country’s newfound global status. As a result, two compelling questions have arisen: Why do China’s neighbors choose to neglect its interests? And why, despite China’s rise, do its authorities seem increasingly unable to secure Chinese lives and commercial interests abroad?

Chinese anxiety about these questions forms the atmosphere shaping Chinese policy. With Muammar el-Qaddafi’s fall from power in Libya, Chinese companies lost investments worth roughly $20 billion, which Libya’s new government has implied are unlikely to be recovered. Many Chinese were disquieted by their government’s decision to evacuate China’s citizens from Libya, and would have preferred a bolder effort to protect the countries’ commercial assets there.

Similarly, the Chinese government’s later, and quite sudden, about-face in recognizing the rebel Transitional National Council as Libya’s government aroused considerable sneering at home. After all, China spent valuable political capital to oppose NATO’s airstrikes at the beginning of the intervention, only to end up backing the forces that NATO helped bring to power. This was China’s utilitarian, commercially-driven diplomacy at its most transparently hollow.

For most Chinese, Libya is a far-away and out-of-reach country, owing to China’s limited capacity to project power. So the emphasis on restoring Chinese commercial interests is accepted reluctantly if not completely understood. But Myanmar and the other Mekong River countries are supposed to be the country’s “good neighbors,” and are completely within reach of Chinese power, so public anger over threats to the country’s interests in these places is intense.

Those interests include a new oil pipeline linking Myanmar to Kunming, the provincial capital of Yunnan province. China is also working on “connectivity” projects – namely, a rail and highway network – aimed at boosting economic and social ties between China and the ASEAN countries. The Myitsone and Mekong incidents have now cast a shadow over these projects, fueling fear of a chain reaction that could wreck China’s two-decade-long effort to achieve deeper regional integration.

Obviously, Myanmar’s new government does not want to aggravate sentiment in its already-unstable border areas, where rebel groups were using the dam project to rally new supporters. The new government’s effort to share power with political forces in Myanmar’s volatile regions, and thus weaken local warlords, clearly contributed to the decision to halt construction.

The dam’s Chinese investors, for their part, relied too heavily on the depth of the two countries’ bilateral ties, and so heavily discounted the project’s political risks. Their behavior also reflects the implied guarantee of official government mercantilism, as well as the complacency of China’s state-owned enterprises, which account for most Chinese overseas investment. Operating on the assumption that the government will back them – or bail them out if they fail – they can afford to be cavalier.

The Mekong incident tells another grim story. The river, which links five countries, has been long famous as a setting for trans-national crimes such as drug trafficking, gambling, and smuggling. China’s booming economy has brought growing interaction between China and the Mekong’s underground economies. The killing of the 13 Chinese boat crewmen was linked to this trend. But China can best avoid similar tragedies not by flexing its muscles, but by building greater multilateral cooperation to combat transnational crime along the Mekong.

Indeed, China’s neighbors will not be reliably good to Chinese interests unless and until China begins to provide essential public goods – not just commerce, but also full-fledged regional governance based on the rule of law, respect for human rights, and regional economic growth. Otherwise, ruptures such as those at Myitsone and along the Mekong will recur, deepening China’s sense of isolation and panic.

Robert Skidelsky
on why the right economic policies cannot work without the right public expectations.

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